Technology equity markets took a sharp turn in the last two months of Q1 2022, with S&P Technology Index reaching to over 18% in the red in mid-March, before closing the quarter at 7% off. In the last month, across all sectors, Russia’s attack on Ukraine has rattled markets and dented investor appetite amid increased volatility and uncertainty. The decline in valuations is being impacted by the combined headwinds of rising inflation and interest rates, as well as geopolitical uncertainty.
Russia’s invasion of Ukraine triggered an unprecedented phenomenon: global technology firms responded to the invasion by suspending or terminating business operations, effectively self-sanctioning beyond regulatory requirements, often at great expense to bottom lines. This trend will likely continue – in 2022 decisions about where to invest and who to accept investment from will be driven by ethical concerns, as well as the shifting geopolitical risks. However, as we will see in this article, many tech businesses struggle to fully abandon their presence in Russia.
This article highlights some of the ways in which the Ukraine crisis is changing tech M&A.
Expanded scope of Due Diligence
As tech companies embark on M&A deals, proactive and effective risk management will be more essential than ever. Enhanced focus on these issues is likely to translate to expansion of transaction timelines.